Q2 2021 CatchMark Timber Trust Inc Earnings Call

[music].

Good morning, and welcome to the catch Mark <unk> timber Trust second quarter 2021 earnings Conference call all participants will be in listen only mode.

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After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then 1 on your telephone keypad to withdraw your question. Please press Star then 2 please.

Please note this event is being recorded.

I would now like to turn the conference over to Ursula Godoy Chief Financial Officer of please go ahead.

Good morning, and thank you for joining us for our radios catch my timber trust with all of our second quarter of 'twenty 'twenty 1.

I am also note the only he's finding so all of the tariff catch my joining me today on the call are Chief Executive Officer, Brian Davis, Chief Resources Officer, Todd Reitz and done later president of Triple T Timberlands.

During this call Catherine management will make forward looking statements. These forward looking statements are based on management's current beliefs and the information currently available cash.

The actual results will be affected by certain risks and uncertainties that are beyond its control or ability to predict and could cause our actual results to differ materially from expectations.

For more information about the factors that could cause such differences. We refer you to our 2020 annual report on form 10-K, and subsequent reports that we filed with the SEC.

Today's presentation includes certain non-GAAP financial measures reconciliations of these measurements are included in our second quarter 2021 earnings release and financial supplement which are posted on our website and on our form 10-Q filed with the SEC yesterday August 5.2000.

'twenty 1.

After our presentation, Brian Todd John and I will be pleased to answer any of your questions now.

Now I turn over the call to Chief Executive Officer, Brian Davis.

Thanks, Ursula and good morning to all of you on the call. We appreciate your joining us today.

That's the market maintain exceptionally strong momentum in our operations during the second quarter.

Excellent results, including a record quarter for adjusted EBITDA and cash from operations as well as our second highest quarter ever for net income were driven by higher timber prices year over year, both in the U S sales as well as the Pacific Northwest and we continued to capture pricing premiums for our harvest well above.

Market wide averages in our markets, especially in the U S South where we concentrate our activities.

Our pricing advantages more than offset a planned reduction in total harvest volume during the quarter as we maintained our leading productivity on a per acre basis.

Year over year, we increased total revenues in the second quarter by 47% and increased adjusted EBITDA by 86% and we recognized net income of $1.8 million or <unk> <unk> per share.

This performance again is a testament to our business model for investing in Prime Timberlands, and leading mill markets concentrating in the U S South and executing excellence in operations relying on delivered sales and take advantage of opportunistic stumpage sales, all resulting in our leading harvest EBITDA per acre.

Lumber price volatility doesn't translate the log prices consumption and availability of logs in the mill markets does.

We expect to continue to benefit from strong demand fundamentals and beneficial supply side trends.

Housing market, driven by millennial home buying low interest rates and increasing work from home activity should continue to drive the demand side further helped by significant home repair and remodeling activity.

As a result of the decline of Canadian production and the ongoing shift in production to the U S. South Ketchmark is exceptionally well positioned with our prime timberlands near top mill markets to meet the increasing regional demand.

Signaling of need for additional number of production in the region capital commitments have been announced which support 6 Greenfield saw mills slated for the U S. South in 2022 of these projects should translate to heightened law of consumption in the region.

And looking at the pricing advantages, we secured in the second quarter Ketchmark realized U S. South pulpwood and saw timber stumpage prices were not only 25% and 13% higher respectively compared to prior year quarter, but we also captured 71% and 19% pricing.

Premiums over U S south wide averages for the same period.

In the Pacific Northwest, we also capitalized on favorable market conditions.

<unk> sales revenue increased 131% over second quarter 2020, driven by of 75% increase in harvest volume and a 26% increase and delivered solid timber price.

Significant timberland sales activity in the second quarter also bolstered the results as we have already met almost 80% of our full year of timberland sales targets.

We generated $7.6 million in timberland sales in the quarter at 11% higher pricing year over year AD and the increased margin.

Investment management income also increased year over year due to the last year's change in the asset management agreement with the Triple T joint venture.

During the quarter, we also made significant progress in our capital recycling strategy.

The leading the oglethorpe large disposition of 5000 acres of Georgia, timberlands, recognizing a gain of nearly $1 million and using net proceeds to pay down existing debt.

And of major transaction, we agreed to sell our band in timberlands in the Pacific Northwest expecting of substantial gain on the sale in excess of $20 million. This disposition, which we expect to close next week will further strengthen our capital position and enable future growth concentrating in the U S South.

Following the Bandon closing, we anticipate increasing our net income guidance for the full year by the amount of the recognized gain.

And in other major development, which we announced last week significant progress has been made and recapitalizing, our triple T joint venture Triple T has agreed to sell approximately 28% of its timberlands in east, Texas to the client of Hancock Natural resource group.

The sale of 301000 acres for $498 million demonstrates how ketchmark as general partner and asset manager of Triple T has enhanced <unk> financial performance and increase its per acre value.

The per acre sales price of $1656 is a 31% increase over the acquisition cost basis from 3 years ago.

It is also notable that since Triple T. The acquisition of the property in 2018 merchantable tons per acre has increased by 16% inside of index has increased by 7% as a result of improved civil cultural practices.

Triple T has also increased annual revenue generated by the property by 55% compared to 2017 the year before the joint Venture's acquisition of the property.

The proceeds of the Hancock sale, which we expect to close in the third quarter will be used to reduce tripled <unk> leverage and a pay down of portion of the preferred partnership interest in the joint venture.

The Hancock transaction certainly sets the stage for cash Mark to continue to explore further opportunities to unlock additional value for our triple T joint venture partners and cash Mark shareholders.

And look into next steps time and per acre exit value of remained the key considerations for cash Mark in this venture we still have much more to do but over the past 18 months, we've made significant progress.

We're going through Covid renegotiating triple of Ts Wood supply agreement with Georgia Pacific and as a result, not only updating market based pricing, but also improving the assets liquidity.

This set us on the course for the Hancock transaction, a process, which also surfaced additional strong interest in the asset from the market for the next phase of the recapitalization.

We're also encouraged by the durability of product pricing the evolving carbon opportunity and increased mill activity in the region with the <unk> acquisition of GP Mills and can force announcement of a greenfield mill in Western Louisiana.

All of these developments bode well for supply tension in the region that should result in a positive outlook on product pricing and they can contribute to potential higher per acre of land values for Triple T.

Our strategy continues to be highly focused on creating value in triple T for our partners and our shareholders.

Earlier this week cash Mark also amended its existing credit agreement. So we can use the proceeds from the pending bandon disposition. The further deleverage the company, while maximizing future debt capacity the agreement improves liquidity flexibility and balance sheet strength to facilitate future growth.

Yesterday, we declared a cash dividend of $30.5 per share for common stockholders as of August 31, 2021 payable on September 15, our dividend is well covered and we are on track to meet full year guidance as noted.

After the Bandon sale closes we anticipate updating guidance on net income.

To sum up cash Mark had another extremely strong quarter on multiple fronts meeting and exceeding targets significantly increasing year over year revenues and adjusted EBITDA and recognizing a net income importantly, timber sales revenues increased on the strength of higher pricing and pricing premiums that cash markets.

To achieve and our superior markets.

Favorable supply demand dynamics in the U S South region. The nations primary timber basket, where we focus our activities should continue to support future cash Mark results.

And the Oglethorpe large disposition impending bandon sale will further improve our capital position and should pave the way for future growth.

The company continues on course to generate predictable stable cash flow and deliver fully covered dividends. Our primary objectives now I will turn it over to Ursula to discuss second quarter results and review our capital position in greater detail.

Thank you Brian.

Our 3 business segments harvest operations relative.

The date and investment management are all performing very well and we are on plan to meet full year guidance of.

Special note the <unk>.

<unk> premiums above market wide average as we have captured quarter after quarter in our harvest.

We need to set us apart and help boost results.

Taken altogether, the second quarter delivered record performance.

For the quarter ended June 32021, Ketchmark recognized net income of $1.8 million or 4 cents per share driven primarily by of 47% increase in total revenue.

We generated revenue of $31.9 million compared to $21.8 million in second quarter of 2020.

We produced record cash flow from operations of $18.5 million, an increase of 110% over prior year quarter.

Timber sales revenue totaled 21 million, 24% higher than second quarter 2023.

Driven by higher overall timber sales pricing and capturing premium pricing above market average acinar Mike.

The higher revenues also were generated in spite of planned lower harvest volumes, which decreased to 528000 tons from 568000 times a year earlier, while maintaining consistent productivity on a per acre basis.

Adjusted EBITDA of $17.6 million.

The quarterly result increased 86% from $9.4 million in second quarter of 2020.

Breaking out of adjusted EBITDA by segment for the second quarter.

Harvest EBITDA was $9.4 million compared to $7.4 million in second quarter 2020.

The 27% increase.

Real estate EBITDA increased 372% year over year to $7.3 million.

Due to selling 3200 more acres this year as well as capturing and 11% higher per acre of average sales price at an improved margin.

Investment management, EBITDA increased 16% year over year to $3.3 million, including higher asset management fee revenues from Triple T and distributions from the Dawsonville bluffs joint venture, including incentive based promotes.

We also paid a dividend of $13.05 per share to stockholders on June 15, 2021, which was fully covered by cash flow from operations.

Now, let's review of catch my recent activity to strengthen the company balance sheet, including the recent amendment to our credit agreement.

As of June 32021, cash Mark had more than $180 million of liquidity, which puts us in a very favorable position.

We had a cash balance of $22.3 million and $158.2 million of borrowing capacity under 2 credit facility, including $123.2 million under our multi draw term facility and $35 million under our working capital facility.

During the quarter, we used $7.3 million of net proceeds from the other thorpe large disposition to pay down the outstanding balance on our multi draw term facility.

And earlier this week, we amended catch mikes existing credit agreement extending the maturity date of the existing working capital facility from 2022 to 2026.

And establishing a $68.6 million dollar revolver feature on 1 of our timelines.

The terms of the new revolver feature are consistent with our time 8.3 loan and the funds can be used for future acquisitions.

Under the amended credit agreement, we can use proceeds from the upcoming bandon disposition for further deleveraging, while improving future available debt capacity.

We also increased the weighted average life of our debt and maintain current competitive pricing.

The result of the amendment improved liquidity greater flexibility and increased balance sheet strength to maximize debt capacity for future growth.

We also continue to maintain attractive borrowing cost staggered long term maturities and a favorable mix of fixed to floating rate debt.

And as noted catch Martin paid $6.6 million of distributions to stockholders during the quarter.

This dividend was fully covered by cash flow from operations.

Now Todd will review what was another extremely productive quarter for our harvest operations and timberland sales top.

Thank you Ursula for the second quarter cash Mark generated 24% higher timber sales revenue year over year looking specifically at the U S. South robust mill demand in our markets drove a 13% increase in timber sales revenue year over year, resulting primarily from strong pricing, partly offset by 10% of lower harvest volumes.

Our pulpwood and saw timber sales prices were 71% and 19% respectively higher than timber Mart, south south wide averages and 25% and 13% above cash marks realized prices in the prior year quarter.

We registered these excellent results overcoming multiple wet weather events in the U S sales maintaining consistent delivered in stumpage sales kind of working proactively with our customers to help mitigate increased haul costs due to shortage of truck drivers.

In the Pacific Northwest, we capitalized on ongoing favorable market conditions for lumber demand emerging from the depths of last year's economic downturn.

Harvest volume in the region increased by 75% year over year, and we captured a 26% increase in delivered saw timber pricing the <unk>.

Volume and higher pricing combined to increase our quarterly timber sales revenue year over year by 131% in the region.

Our Pacific Northwest operations have been unaffected by recent regional wildfires. The closest fire is on Forest service property, approximately 770 miles east of our ownership and is more than 75% contained.

During the second quarter will utilize the additional delivered logging capacity as we looked ahead to complete the bandon sale in the third quarter and wrap up of regional harvest activities. There. We expect the by the time, we complete the band of sale. We will of produced about 80% of our planned Pacific northwest harvest for the year.

Slowing housing market momentum from the recent sharp upturn and somewhat reduced repair and remodel demand has slightly increased saw mill lumber inventories. However, they remain thin in the third quarter.

The mills are not building mud log inventory in our markets, which has helped us maintain significant pricing premiums labor shortages are an issue at the mills to they had been running at 90% capacity, primarily with 1 shift and can produce more if they could run additional shifts.

The pulp business is steady with strong global demand for linerboard of tissue products bolstering outlooks for our mill customers for the rest of the year.

Production across the US South had moved the seasonal thing during the second quarter, which helped to increase inventory levels and moderated delivered pricing.

Overall, our markets were very well positioned for the near term and we remain on track to meet guidance for harvest volumes, taking into account the necessary adjustments, we will make in the way because of abandoned sales.

We continually strive to maximize the value of every acre of our timberlands, including seeking new and emerging markets such as we did with mitigation bank credits on our Dawsonville bluffs JV property.

And as we explore opportunities across our entire portfolio to capitalize on the evolving carbon sequestration market.

Now, let's review Timberland sales.

Second quarter as expected generated a significant percentage of our targeted 2021 sales as of June 30, we have completed approximately 80% of planned sales for the year and remain on course to meet full year guidance with a strong outlook for rural recreational sales in.

In the second quarter, we sold a total of 4300 acres 3200 acres more than in second quarter of 2020.

Sales totaled $7.6 million compared to $1.7 million in the prior year quarter.

We also registered in the 11% higher average per acre sales price $1743 in the second quarter 2021 versus $1564 in second quarter 2020 <unk>.

Consistent with our strategy to focus sales on acres that are less productive or have lower near term cash flow potential our second quarter sales had significantly lower average Marshall timber stocking levels 17 tons per acre versus our portfolio average of 41 tons per acre. We also generated an improved margin 26% in second quarter 2.

'twenty, 1 compared to 13% in the prior year quarter.

The overall fourth large disposition of 5000 acres per.

For $7.5 million was also completed during the quarter the <unk>.

<unk> recognized an $800000 gain and generated $7.3 million of net proceeds, which we used to reduce our leverage in summary, the second quarter was particularly active and productive on the operations side, Brian back to you.

Thanks, Todd cash market had a record second quarter marked my outperformance and the execution of several significant strategic initiatives to support our broader plan to simplify the business strengthen our balance sheet and position the company for future growth.

These initiatives included Oglethorpe the agreement to sell band and at a substantial gain the credit agreement Amendment and Triple T. A definitive agreement to sell 301000 acres.

We believe that the current housing shortage, along with mill expansions in the U S south with strength in demand and our premier saw timber and pulpwood markets.

We remain laser focused on executing our tested in simple strategy.

Investing in Prime Timberlands, and leading mill markets and optimizing the operations to produce superior results on a sustainable basis, primarily utilizing delivered wood sales as well as opportunistic stumpage sales.

Our capital recycling strategies of reduce leverage and we are well positioned to take advantage of future opportunities concentrating our business in the U S South where we have a robust platform and see the greatest opportunity for growth.

We are on track to meet full year guidance and expect to formally update guidance on net income when the pending bandon transaction closes.

And our dividend remains fully covered by cash flow from operations.

The <unk> excellent results, our strengthened capital position and the consistent success of our operating strategy provides significant momentum for creating shareholder value. Thank you for your attention today and now Ursula Todd John and I will be happy to take your questions.

We will now begin the question and answer session.

To ask a question you May press Star then 1 on your telephone keypad.

If you were using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then 2.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Dave Rodgers with Baird. Please go ahead.

Hey, good morning, everybody I'm, Brian I wanted to start obviously you guys have been busy this quarter of a good quarter from an operations perspective, and you were able to delever and take some noncore assets out of the portfolio I'm curious about the the growth aspect I guess, you mentioned very close to the end as you're positioned for growth I guess when would we expect to.

Seeing that what are your acquisition pursuits of like today or are you really in the market for new acquisitions and deploying capital as you kind of finished the transition and move to that growth phase.

Good morning, Dave Great question.

It is part of our overall strategy the simplification of strengthening our balance sheet and putting us in position for growth.

With this it is actually immediately post band and our leverage profile is going to be just over 5 times the settle out somewhere around the 6 times as we look kind of full year run rate basis, which means that we have some.

Some capacity as it relates to our balance sheet to look at growth and so which comes back to us on the standpoint of there's really 2 things that we're focusing on as we think about our time allocation, obviously of 100% of our time is going to be allocated at the operating the business, 80% of our time is really going to be focusing on executing on the remaining 8 <unk> eleventh's associated.

With Triple T and the other 20% if you're doing your math, we're now at 200% of our actions are.

To really focus on growth opportunities and so when I sit here and take a look at our pipeline. It has grown since our first quarter numbers at you know obviously, we're focused very much specifically in the southeast specifically around our operating areas and so from our standpoint of our appetite kind of fits in that time.

<unk> as it relates to execution, we're continuously always looking at opportunities I think the actual closing of band in the actual execution of those things.

Increase our appetite or willingness to go forward, we'll look at acquisitions.

That will that can also be strategic in nature, meaning that it may not provide for immediate cash flow, but may provide for long term support in the market in which we really like and those are going to be existing operating markets or are they may be stocked full of wood and it's an opportunity like our acquisition.

The acquisition, we made which is the Townsend acquisition, which is in coastal Georgia. So our appetite is improving it is an important part of over over a long term strategy, obviously, we had to.

The get our way through some of these elements that put us in the best position to do so, but we're closer now than what we were of last quarter.

We will take the 200% as long as it doesn't cost more in G&A and then I guess from that same day [laughter] would you be willing to go to the equity markets to kind of accelerate that transaction or are you still focused on kind of the trade off between asset sales in the investment.

Well never say never Dave So we continue to be disciplined as it relates to our share price and given where our cost of debt is at sub 2.5% equity is $4.75, $4.60 as of share prices of the day, we do have an ATM in place.

And it puts us in a position to.

Work very efficiently that goes along with that for the right opportunities with.

Again, we're in a closer positioned today than we were before.

Great. That's helpful. And then maybe 1 last 1 for Todd just on the added mills in the southeast that you had talked about previously clearly that's been a driver over the past several years. It's taken a couple of years from the mill deployments to start to see the pull through in the demand.

What do you expect in terms of timing of even the incremental investments that youre seeing across the southeast and how that might impact you if I understood your comments correctly.

Sure.

So when you think about the the most recent ones that have been announced the you know more of those are really focused towards the Gulf South region. If you will kind of your Mississippi, Alabama area, Louisiana.

So some of that will impact some of the the ownership we have over with Triple T, but where the biggest impact that we've had to our core ownership here, we've really talked about that in previous quarters and over the course of the last year or so is a lot of the capital that came in early on.

Really in the Georgia area has started to already come online, we've seen GP and some others.

The bring their mills up in addition to a lot of capital being placed by Interflora can form their mills as they've gone through an increased capacity. So we've begun to see some of that I think you'll see it in the in the results that we've posted since the beginning of the year improvement in pricing and just the durability of the markets that we're in that is driven by where the investment.

There have been made where they were planning to see growth and so we've been able to capitalize on that and the benefit from those those increases. So I would say some of that has already occurred for us what youre going to see is more of a pull through on the entire south.

The Gulf States start to see some of that impact as well.

Great very helpful. Thank you.

Okay. Good.

Next question is from Paul Quinn with RBC. Please go ahead.

Yeah. Thanks, very much I had great great results, just well I guess more color on where you think you'll you'll you'll raise guidance too I mean, I understand that youll do that after.

The it closed banning but.

If you could look forward here.

What would the range of it.

Hey, Paul This is Brian Good morning Love your enthusiasm I think that's absolutely fantastic I mean, obviously youre feeling the same bullishness as we are about our product pricing in the markets in which we operate in for us.

It's really land sales that are episodic I mean, we're coming off of a very strong second quarter. Obviously, we've got 80% of our land sales are really in the boat at this point in time.

Give us another quarter I appreciate again, your enthusiasm, but that'll put us in a better position regarding some guidance.

Okay, and then just on the Triple T.

Great work on monetizing the 20%.

Jerry healthy premium just wondering.

But the timeline of its on the balance of the 80.

Yeah. So I'll just give you a perspective I think of in the last call. We said that we were in the late.

Uh huh.

Third and early fourth inning, the way I would describe it today, we're early innings of the second game of the doubleheader and so our timeline it really hasnt change is really.

We look to execute in the next 9 to 11 months would be our expectations hopefully sooner than that all of our options still available to us.

The Hancock sale doesn't change any of those options that can be anything from continuation of asset sales restructuring the joint venture because.

The size of this of nearly $500 million can provide us an opportunity of cash out the financial interests of the pre.

<unk> partners and there are other strategic partners that would want us day in from a land of standpoint, and we can also look at bringing in new capital from the new third parties to recapitalize the entity and so all of those all of that activity as you can imagine I, just because we've announced something doesn't mean, we have been working parallel with other opportunities and so.

That would be our expected timeline.

Yeah.

Alright, that's all I had thanks guys.

Thanks, Paul Thanks, Paul.

Next question is from Anthony Pettinari with Citi. Please go ahead.

Hi, good morning.

We started to see timberland transaction volumes pick up and I'm. Just wondering if you look at kind of of the market prices that youre seeing for industrial quality Southern timberlands.

Versus say 2019 or pre pandemic period do you think prices are.

Essentially flat maybe up low single digits mid single digits I'm, just trying to get to the kind of understand what kind of price improvement you are seeing for southern timberlands, if any and how that.

Impacts kind of appetite for acquisitions.

Yeah its interest.

Morning, Anthony as Brian very interest in question and 1 that we've been challenging ourselves with is that we've seen valuations have been steady so really it's been a quality over quantity as it relates to markets markets continue to matter, but the prospects of Greenfield operations. While they are still speculative can have an impact.

On the overall market and that would be the case of where a rising tide lifts all ships and so think about the markets. We've been operating in you continue to have a drain in those markets. You continue to have capital expansion of those markets and so I would say in the markets in which we operate in you could actually see some rise.

Rise in valuations more so than we may have seen over the past 2 or 3 years now how does that impact you from an acquisition standpoint, I mean, the market is the market and you want to be buying through all markets and so you ended up having a you're trying to avoid as much vintage ricks risk as you can as you do from an M&A standpoint, but I think we're really on the front.

And of this you combine that with the durability associated with product pricing you get more bullishness associated with cap rates and take a look at 10 years.

You can actually start seeing valuations go up.

Oh, Okay. That's very helpful. And then just on Triple T. The the 300000 acres that you sold versus the remaining.

The $1.1 million.

Is there anything that you would say about the 300000 parcel.

Parcel in terms of.

Qualitatively in terms of stocking species proximity to a mill is it.

How would you kind of position it within the broader $1.1 million.

The premium that you got for that 300000 is it.

Essentially representative of what you could get for the rest of the property of more aspirational or just how should we think about it versus what what remains.

Yeah, Great question.

Really we think 16.56 of the floor, we still have at 800000 acres, we can still break that down and the 5 smaller parcels if necessary with.

With the minimum of 100000 acres per parcel. So as you can appreciate the $5 million of house on the market stays a little bit longer than a $250000 house on the market and so we believe we can get some premium by potentially breaking it down into smaller asset sizes.

The remainder.

Has slightly more stocking and slightly shorter haul distances, so that really translates into a higher valuations and also on the 300000 acres it had of disbursed.

Disproportionate amount of hurricane damage from Hurricane Lora relative to the remainder.

And then you combine that with sentiment vendor for cash for moving into the marketplace, which creates additional attention from outside purchasers and then you changed that with the additional sentiment.

These processes take a little while and so we're only reporting really our third consecutive quarter of product price appreciation of it takes a little while the change sentiment that has an impact that translates down on the per acre basis, so from our standpoint.

We have a lot of variables that'll give you an indication that we believe 16.56 of the floor.

Okay. That's very helpful. And then maybe just 1 last 1 from me I think you said you could be.

6 times debt to EBITDA pro forma post spend and is there a kind of a target leverage range or an optimal.

Debt to EBITDA range that you'd point us to as you think about the long term.

Hey, good morning, Anthony of the Sarasota.

Yeah. So we have been very.

And how we're viewing of our leverage target.

<unk> seen is that over the last 2 to 3 years, we continue to work down.

To a lower leverage number of range has been anywhere from the 5 to the <unk> with an average of 8 of you heard Brian talk about you know.

The EMEA repos, the Bandon transaction will be right at that.

And the <unk>.

<unk> number.

But yeah, I mean looking at our adjusted EBITDA numbers right now for our guidance range.

That would put you somewhere in the 6 it I think from a specific target Israeli just inside of that same range of.

We see that lowered the battery.

And again all of the activity that we have continued to do related to the time of year. Just shows the continued progress that we've made toward that.

And that has been great progress Ursula and from the standpoint, we have a lot of liquidity for.

What you and your team of we're working on with the most recent credit agreement that allows us when opportunities do come up for us to be able to execute on those and so as you've seen Anthony from time to time, we may pick up over 8 times and stay down below 8 times, but on average of around 8 times.

Okay. That's very helpful I'll turn it over.

Great. Thank you.

Again, if you have a question. Please press Star then 1.

The next question is from Buck Horne with Raymond James. Please go ahead.

Hey, good morning, everyone, Yeah, great quarter Fantastic job I guess I'm curious just on the pricing premiums that you achieved on these market wide averages just clarifying.

Understand.

Are there any unusual factors in this particular quarter driving those substantial premiums just trying to understand how sustainable those those kind of spread or longer term or if there is anything just to be aware of in this particular quarter.

Hey, good morning.

Really I think what you look at it as Youre looking at the strength of the markets, where we primarily operate compared to the south wide average and we've talked about all markets are not created equally and Thats why we focused on the ones that we sit in.

Along the lines of some of the questions earlier these markets have.

Grown you've seen added capacity come in the investments being made and so you're beginning to see the benefit of some of that from.

Any type of special pricing or anything that we had out there you did have some uplift coming.

On the on our pulpwood side in the part of our businesses associated with hardwood pulpwood and we have some special track pricing out there we were able to capitalize on so it boosted that up a little bit.

You think about where we are looking at for Q3 on the pulp side kind of going forward I think of it.

Look back at Q1 will be a little bit closer to that.

Additionally, this time of year, you have cyclical nature of just.

More availability typically of production and pricing to moderate a little bit you know until youre doing a little more things, we have a little more cost associated with it but all in all I would say you would expect to see some very consistent pricing from us moving forward.

Really just you know markets have been stable almost all long side of things. The demand is really good they arent building a tremendous amount of log inventories. So that's maintaining these levels that we see all of them.

We talked about early on in the year as we saw some of the uptick coming out of Q1, we felt like we would be able to hang onto that.

The it felt like this was the early stages of the durable run going forward and we're seeing that so capitalizing on that going forward is our focus and feel good about where we sit today.

Okay.

Really helpful. I, just want to maybe follow up a little bit there I mean, you have mentioned that the mill inventories I guess, starting to restock, a little bit I mean, the lumber prices of the correctly.

Rather significantly in such a short period of time here housing production overall.

It seemed to be constrained by some supply chain challenges out there.

You're also dealing with logging and hauling costs that are probably going to stay elevated from drivers where do you have you seen any mills.

In your region, just starting to curtail capacity or shutting in some shifts due to these cost increases.

No none whatsoever, you know honestly.

You've seen some of the additional announcements coming in so I think that's an indicator of that regardless of where you sit in the south there is still a tremendous amount of focus on growth from the potential their capital being place. So the longer term view of this.

Improvement is going to have some legs to it I think is beginning to play out and then the replacing their bets on that from a pullback in production or anything like that no. None of that Additionally, as our pricing is looking to be.

Relatively stable if you will moving forward from a stumpage basis as the strong indicator that we're working very proactively with our customers looking.

Looking at the value, we bring to the table with our delivery program and being able to basically pass through some of the added cost. If you will such that the landowner isn't being doing for it and so you can offset some of that added logging cost. If you will maybe a little bit higher delivered price, but in the engine net stumpage remains the same.

Great. Thanks, Alright, congrats guys great progress.

I appreciate it thanks Bob.

This concludes our question and answer session I would like to turn the conference back over to Brian Davis for any closing remarks.

Great. Thanks, Gary well, everybody stay safe and enjoy the rest of your summer and we will talk with you in November Thank you very much.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Yeah.

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Okay.

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